In re: Application and Petition of Hanwei Guo
No. 19-781
United States Court of Appeals for the Second Circuit
July 8, 2020
August Term 2019
(Argued: February 28, 2020 Decided: July 8, 2020)
In Re: Application and Petition of Hanwei Guo for an Order to take Discovery for Use in a Foreign Proceeding Pursuant to
HANWEI GUO, Petitioner-Appellant,
v.
DEUTSCHE BANK SECURITIES INC., J.P. MORGAN SECURITIES LLC, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, MORGAN STANLEY & CO. LLC, Respondents-Appellees,
CHINA PUBLISHING CORPORATION, OCEAN INTERACTIVE (BEIJING) TECHNOLOGY CO., LTD., TENCENT MUSIC (BEIJING) CO., LTD., OCEAN INTERACTIVE (BEIJING) CULTURE CO., LTD., TENCENT MUSIC ENTERTAINMENT GROUP, AKA CHINA MUSIC CORPORATION, Intervenors-Appellees.
Before: LIVINGSTON and PARK, Circuit Judges, and UNDERHILL, District Judge.1
FOR PETITIONER-APPELLANT: RENITA SHARMA, Peter E. Calamari, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY.
FOR INTERVENORS-APPELLEES: FRANCES E. BIVENS, Jonathan K. Chang, Peter M. Bozzo, Davis Polk & Wardwell, LLP, New York, NY.
FOR RESPONDENTS-APPELLEES: Pamela A. Miller, Allen W. Burton, Gerard A. Savaresse, O’Melveny & Myers LLP, New York, NY.
BACKGROUND
I.
From 2012 to 2013, Petitioner-Appellant Hanwei Guo invested nearly CNY 180 million (approximately $26 million) in companies known as Ocean Technology, Ocean Music, and Ocean Culture (“Ocean Entities“), founded by a music executive and lawyer named Guomin Xie (“Xie“). These businesses operated in the Chinese music streaming market. Xie was the head of the Ocean Entities and China Music Corporation, a holding company allegedly created to facilitate the Ocean Entities’ access to foreign equity markets. Through a series of transactions that Guo asserts were misleading, extortionate, and fraudulent, Guo sold his shares in the Ocean Entities for less than they were allegedly worth. Eventually, following a series of mergers, Ocean Music became part of Tencent Music, by some metrics one of the largest music streaming services in the world.
In September 2018, shortly before Tencent Music conducted its American IPO and pursuant to agreements among Guo, Xie, and others, Guo initiated arbitration against Xie, Tencent Music, and several other entities before the China International Economic and Trade Arbitration Commission (“CIETAC“). Guo claimed that Xie and the other respondents had defrauded him and that he was entitled to be paid compensation and to have his equity stake restored. Subsequently, at least one respondent filed counterclaims, and the parties selected an arbitral panel in April 2019. The matter remains pending, with a hearing before the arbitral panel scheduled to proceed on July 21, 2020.
II.
According to declarations submitted by the parties, CIETAC was established by the People’s Republic of China in 1954 as part of the China Council for the Promotion of International Trade (“CCPIT“). CIETAC’s administrative leadership is appointed by the CCPIT, although the arbitrators who preside over any given case are selected by the parties from a list that is compiled by CIETAC without CCPIT involvement. Potential arbitrators are not required to have any ties to the Chinese government or to undergo screening by any entity other than CIETAC, although Chinese arbitration law does set certain minimum qualifications for arbitrators. CIETAC arbitrations are confidential both during the proceedings and after their completion. Both CIETAC and CCPIT receive
CIETAC’s jurisdiction is restricted to disputes between private parties who have elected CIETAC arbitration through contractual agreement, as well as certain contractual disputes arising between investors and Chinese governmental entities. CIETAC has promulgated two different sets of rules to govern these two varieties of arbitration. This case, as a dispute among private parties, is governed by the rules set out by CIETAC for private arbitration. Under this ruleset, CIETAC’s jurisdiction over any particular matter depends entirely on the agreement of the parties.
In any given arbitration, CIETAC operates independently of the Chinese government, with CIETAC arbitrators having the power to issue awards that Chinese law will recognize as “final and binding.” Joint App’x 683. Chinese arbitration law, however, provides for certain circumstances in which awards may be set aside as contrary to Chinese law, such as situations involving fraud or bribery of arbitrators or instances in which there was an initial lack of an agreement to arbitrate.
As part of the arbitration process, CIETAC rules provide for discovery, including a mechanism by which the arbitration panel may order parties to produce evidence.
III.
In December 2018, Guo filed this petition for discovery pursuant to
WL 917076, at *3 (S.D.N.Y. Feb. 25, 2019). The court’s determination was based on its conclusions that (1) NBC remained good law in the wake of the Supreme Court’s decision in Intel, such that the district court was bound by the Second Circuit’s prior determination that
Guo timely appealed, challenging both aspects of the district court’s holding. On appeal, Guo contends that private arbitrations are within the scope of
DISCUSSION
The two questions on appeal are whether private international commercial arbitrations are proceedings for which
I.
The statute imposes several mandatory requirements for a
v. Cravath, Swaine & Moore LLP, 895 F.3d 238, 243 (2d Cir. 2018). If the statutory preconditions are met, district courts exercise discretion to determine whether and to what extent the requested discovery should be permitted, guided by a set of factors outlined by the Supreme Court in Intel. See Mees, 793 F.3d at 297–98 (citing Intel, 542 U.S. at 264–65).
This Court has previously analyzed the contours of the statute’s “foreign or international tribunal” requirement with respect to arbitration. In NBC, we considered whether a “private commercial arbitration administered by the International Chamber of Commerce (‘ICC’), a private organization based in Paris, France” was a “proceeding in a foreign or international tribunal” for purposes of
Our decision in NBC concluded that: (1) the statutory text, namely the phrase “foreign or international tribunal,” was ambiguous as to the inclusion of private arbitrations; (2) the legislative and statutory history of the insertion of the phrase “foreign or international tribunal” into
statutory and legislative history, first determining that the phrase “foreign or international tribunal” had been introduced into the statute for the purpose of expanding the original formulation, which provided for assistance only with respect to “judicial proceeding[s] in any court in a foreign country.” Id. at 189 & n.4 (quoting
The Court also found compelling the legislative history surrounding the replacement by the new
indicated that the new
Shortly after our decision in NBC, the Fifth Circuit followed suit in Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999) (”Biedermann“). Based on its own analysis of legislative history, the near-uniform limitation of references to “arbitral tribunals” within the U.S. Code to adjuncts of foreign governments or international agencies, and policy considerations, the Fifth
Circuit joined the Second Circuit in holding that
Five years after NBC, the Supreme Court issued its seminal decision in Intel—the only Supreme Court case to address
arbitration tribunal qualifies as a “tribunal” under
Intel Court said nothing that would make [the court] doubt the outcome of [its] textual analysis” and ”Intel contains no limiting principle suggesting that” the word “tribunal” should be read to exclude private arbitration. Id. at 725–26.
Recently, the Fourth Circuit also addressed the question, holding that
Meanwhile, district courts within the Second Circuit have split on the question whether NBC remains intact post-Intel. Compare, e.g., In re Children’s Inv. Fund Found. (U.K.), 363 F. Supp. 3d 361, 369–70 (S.D.N.Y. 2019), with, e.g., In re Petrobras Sec. Litig., 393 F. Supp. 3d 376, 385 (S.D.N.Y. 2019). We now clarify that NBC remains binding law in this Circuit.
II.
Contrary to Guo’s insistence that NBC has been overruled or otherwise undermined by the Supreme Court’s decision
in a particular case must have broken the link on which we premised our prior decision or undermined an assumption of that decision,” Doscher, 832 F.3d at 378 (internal quotation marks, alterations, and citations omitted). “If a panel concludes that a particular Supreme Court decision does not cast sufficient doubt on our precedent, the precedent continues to be binding.” Doscher, 832 F.3d at 378.
Intel does not cast “sufficient doubt” on the reasoning or holding of NBC. Id. Critically, the question whether foreign private arbitral bodies qualify as tribunals under
n.71 (1965)). We doubt whether such a fleeting reference in dicta could ever sufficiently undermine a prior opinion of this Court as to deprive it of precedential force. Indeed, even the Sixth Circuit, in reaching an outcome contrary to NBC, refused to ascribe such significance to the language in question. See In re Application, 939 F.3d at 725 n.9 (determining only that “the Supreme Court’s approving quotation of the Smit article . . . provides no affirmative support” for a reading of the statute that excludes private arbitration).
Moreover, even assuming that cursory dicta could have the effect of abrogating our precedent, the language quoted by Intel had no such impact, as it is not definitively at odds with NBC. Professor Smit’s reference to “arbitral tribunals” does not necessarily encompass private tribunals, particularly in light of his view, expressed in a 1962 article cited in NBC, that “an international tribunal owes both its existence and its powers to an international agreement.” Hans Smit, Assistance Rendered by the United States in Proceedings Before International Tribunals, 62 Colum. L. Rev. 1264, 1267 (1962); see also NBC, 165 F.3d at 189. Intel’s indirect reference to “arbitral tribunals” can thus be read consistently with NBC as referring solely to state-sponsored arbitral bodies. At bottom, Intel’s reference to
Professor Smit’s article casts no doubt upon our analysis in NBC.5
question that the Intel Court had no occasion to consider—does not render NBC’s treatment of legislative history incompatible with that of Intel. Contrary to Guo’s contention on appeal, NBC’s refusal to read such a sweeping expansion into the statute in the absence of clear statutory language or any indication of congressional intent is consistent with Intel’s observation, in rejecting a foreign-discoverability requirement, that “[i]f Congress had intended to impose such a sweeping restriction on the district court’s discretion, at a time when it was enacting liberalizing amendments to the statute, it would have included statutory language to that effect.” 542 U.S. at 260 (quoting In re Application of Gianoli Aldunate, 3 F.3d 54, 59 (2d Cir. 1993)). Ultimately, Intel’s approach to interpreting
Having thus concluded that we remain bound by NBC, we turn to the question whether the CIETAC arbitration qualifies as a private international commercial arbitration,
III.
The district court correctly concluded that the CIETAC arbitration is a private international commercial arbitration outside the scope of
NBC made clear that “international arbitral panels created exclusively by private parties” are not “foreign or international tribunals” within the meaning of
adjudicatory bod[y].” Id. We now clarify that the “foreign or international tribunal” inquiry does not turn on the governmental or nongovernmental origins of the administrative entity in question. No single factor clearly distinguishes a private international commercial arbitration from a state-sponsored one. Rather, echoing the functional approach adopted by the Intel court in determining whether the Directorate General-Competition qualified as a tribunal, see 542 U.S. at 257–58, we consider a range of factors, including the degree of state affiliation and functional independence possessed by the entity, as well as the degree to which the parties’ contract controls the panel’s jurisdiction. In short, the inquiry is whether the body in question possesses the functional attributes most commonly associated with private arbitration. Here, considering these factors, it is clear that CIETAC arbitrations are private international commercial arbitrations falling outside the ambit of
Beginning with state affiliation, our focus is on the extent to which the arbitral body is internally directed and governed by a foreign state or intergovernmental body. CIETAC was, all parties agree, originally founded by the Chinese government. CIETAC now, however, functions essentially independently of the Chinese government in the “administration of its arbitration
cases.” Joint App’x 682. According to the parties’ declarations, CIETAC maintains confidentiality from all non-participants during and after arbitration, limiting opportunities for ex parte intervention by state officials. CIETAC offers parties a pool of arbitrators who are not selected by any entity other than CIETAC and who do not purport to act on behalf of, or have any mandatory affiliation with, the Chinese government. Indeed, the arbitrators appear to come from many different backgrounds and nations. These facts suggest that CIETAC possesses a high degree of independence and autonomy, and, conversely, a low degree of state affiliation.
We next consider the degree to which a state possesses the authority to intervene to alter the outcome of an arbitration after the panel has rendered a decision. Here, the limited review provided to parties to CIETAC arbitrations in Chinese courts and the role of the Chinese government in enforcing awards are not enough to render CIETAC a “foreign or international tribunal.” As an initial matter, the grounds for setting aside an arbitration under Chinese law cited by Guo overlap extensively with the grounds upon which a party could petition a U.S. court to set aside an arbitration award, including a lack of agreement to arbitrate, the scope of the matters to be arbitrated, improper appointment of
arbitrators, and fraud or bribery by the arbitrators or parties. See
public entity because of its reliance on a given state’s commitment to enforce its contracts or uphold its charter.
Turning to the nature of the jurisdiction possessed by the panel, the CIETAC panel derives its jurisdiction exclusively from the agreement of the parties and has no jurisdiction except by the parties’ consent. By contrast, state-affiliated tribunals often possess some degree of government-backed jurisdiction that one party may invoke even absent the other’s consent. Because CIETAC’s jurisdiction flows exclusively from the parties and not any governmental grant of authority, CIETAC more closely resembles a private arbitration.7
Moreover, the ability of the parties to select their own arbitrators further suggests that CIETAC is a private arbitral body rather than a “foreign or
international tribunal” under
Considering the above, we are persuaded that CIETAC panels function in a manner nearly identical to that of private arbitration panels in the United States. As such, we conclude that CIETAC arbitration is best categorized as a private commercial arbitration for which
* * *
so broadly as to include private commercial arbitrations. Because NBC remains good law following the Supreme Court’s Intel decision, and because the CIETAC arbitration at issue in this case is a private commercial arbitration, Guo may not rely on
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s denial of the petition.